FUTURES WRAP: LME scrap contracts fall heavily; March trading volumes set record highs

Near-term scrap futures contracts on the London Metal Exchange fell sharply in the week to April 7, while trading volumes declined.

Platts April contract, as assessed by S&P Global Commodity Insights, was down $8.75/mt at $636.50/mt on April 7. The May contract fell $30.75/mt to $609.50/mt, while the June contract fell $35/mt to $599.50/mt.

The backwardated structure over the April-June portion of the forward curve strengthened, suggesting that futures traders on April 7 continued to expect physical scrap prices to soften in the near term.

Spot prices for physical imports of premium heavy melting scrap 1/2 (80:20) increased 25 cents/mt week on week to $654/mt CFR Turkey on April 7, as most mills continued to hold back from buying, with limited deals heard at largely unchanged levels.

"The market is stable but still silent so that's why prices can decrease a little bit in my opinion, if we don't receive any demand from mills next week -- I think it will be clear next week," a Turkish agent said.

LME scrap futures trading volumes in the week to April 7 totaled 22,790 mt, down from 85,690 mt a week earlier. Trading volumes for March totaled 470,890 mt, the highest since May 2020, when they totaled 557,250 mt, as sharp pricing volatility due to Russia's invasion of Ukraine boosted futures activity.

Near-term rebar futures contracts also saw strong losses over the week to April 7, in line with scrap.

The Platts assessed April contract was down $10.50/mt at $939.50/mt. The May contract fell $16/mt to $929.50/mt, while the June contract dropped $11/mt to $919.50/mt.

The backwardation over the April-June portion of the forward curve strengthened over the week, also suggesting that futures traders still expect prices to soften in the near term, albeit still at elevated levels.

Turkish physical rebar export prices were stable week on week at $960/mt FOB on April 7, maintaining a range of $955-$960/mt FOB throughout the week, as market participants continued to note that buyers in Europe were willing to accept high prices compared with other export markets.

Overall demand was slow as the European safeguard import quota period opened, and European buyers focused on clearing shipments. The total country-specific quota of 86,412 mt for Turkish-origin rebar imports was completely exhausted, while 2,287 mt was awaiting allocation at around 6 pm London time April 6.

The ongoing Islamic holy month of Ramadan also put pressure on export demand from regular, non-European markets.

Rebar futures weekly trading volumes in the week on the London Metal Exchange totaled 6,460 mt on April 7, down from 14,140 mt the previous week. Trading volumes for March totaled 201,650 mt, the highest since the contract launched, surpassing the earlier record high of 149,700 mt traded in February.

The daily outright spread between Turkish export rebar and import scrap was assessed at $306/mt April 7, down 25 cents/mt week on week.

Elsewhere, Indian scrap futures, which settle basis the Platts CFR Nhava Sheva shredded scrap assessment, traded 120 mt over the week to April 7, down from 150 mt traded the previous week. The contract has seen a total volume of 4,380 mt traded since its launch in late July 2021.